STRENGTHS

Major regional and international trading hub and for the financial sector

Large FDI inflows thanks to the advantageous tax regime, political stability and an excellent business climate

Leading exporter of capital in Asia through the Temasek and Government of Singapore Investment Corporation (GIC) sovereign funds

WEAKNESSES

Economy dependent on exports

Shortages of skilled labour

Ageing population

Vulnerability to slowdown in the Chinese economy

RISK ASSESSMENT

Stable Singaporean economy

Economic growth in Singapore in 2018 should hold steady despite a slowing in exports to China. It will be sustained by world economic demand, in particular in the new technologies sector, with the upturn in exports of semi-conductors that started in 2017, in financial services and retail sales. The slight rise in oil prices will benefit exports as Singapore is the world’s third largest refining centre. The slow rise in energy prices, a slight upturn in household consumption and the government’s expansionary budget policy (increased redistributive spending) will give a boost to inflation. Household confidence will however be kept buoyant thanks to the stability of the Singapore dollar (pegged to a mainly US dollar weighted basket of currencies) and a falling unemployment rate. In addition public investments will make a positive contribution to growth in this context, in particular through infrastructure projects such as the high-speed rail link between the City-State and Kuala Lumpur, as well as “future economy” programmes which, in 2017, involved $8 billion (approximately 2.5% of GDP), to improve productivity and stimulate innovation in the 23 industries which are already growth hubs. The aim is to achieve growth of 2% to 3% a year for the next 10 years by improving the competitiveness of companies and the workforce. In addition, the advantageous tax regime will continue to attract significant foreign direct investments, equal to 19% of GDP in 2018.

Confirmed resilience of financial situation

The budget situation for Singapore will remain very sound. In 2018, thanks to increased receipts by the sovereign funds, the country will continue to record a budget surplus whilst maintaining its expansionary budget policy. In addition, whilst there is a high level of public debt, this is more than made up for by the size of the financial assets held by the sovereign funds. The bond issues are not used to finance the public debt but to develop a local State bond market and to support the Central Provident Fund, the leading Singaporean pension fund.

In 2018, the current account balance will run a large surplus. Whilst the surplus in the balance of trade will increase, in particular thanks to the slight uplift in energy prices, this trend will be counterbalanced by a deterioration in the balance of services and income. In addition the opening of the City-State, and the matching role as a regional and international trading hub, explains why the downwards trends in exports are mirrored by fluctuations in imports, and thus the constancy of the current account balance. In this context, the level of foreign currency reserves will remain high (at around 7 months of imports in 2018).

Whilst the banking sector is exposed to property market risks, its granting of mortgages has been cautious and remains in line with the regulatory requirements: the rapid expansion of credit, combined with very high property prices, is not expected to present a risk for 2018. Singaporean banks are also exposed to risks associated with the high level, although deemed sustainable, of household indebtedness (the equivalent of 75% of GDP in 2017), the slowdown in the Chinese economy through trade finance operations, and the pressures associated with low oil and gas prices. However, the levels of capitalisation and liquidities, the stabilising of bad debt levels, as well as strong performances in the resistance tests carried out by the Singaporean financial authorities would indicate that the banking sector will be resilient in 2018.

Stability on political stage

The Prime Minister, Lee Hsien Loong, who comes from the People’s Action Party (PAP), which has held power since independence in 1965, was elected in mid-2017 for a term of office ending in 2021. Politics in Singapore are symbolised by stability and continuity with the PAP successfully maintaining its domination of national political life, credited with careful supervision of the active economic policies and the tranquil nature of the social milieu. Governance in the country is also excellent, thanks to its effective legal system which facilitates debt collection, helping to underpin the business climate, near the top of world rankings. In 2018, Singapore will hold the Presidency of the Association of South East Asian Nations (ASEAN) and intends, in this context, to work to improve regional security, reinforce economic integration to increase the attractiveness and competitiveness of the region and to promote collaboration in terms of innovation, and this in particular in the new technologies sector. Finally, Singapore diplomatic efforts have been working towards improving relations with Malaysia.

Last update: January 2018

Payment

Cheques, cash and bank transfers are all frequently-used means of payment within Singapore. Bank transfers, fast and secure, are widely used for international transactions. Standby Letters of Credits and Irrevocable Letters of Credit are often used in export transactions.

Debt collection

Amicable phase

The amicable phase begins with the seller contacting buyers in writing, by telephone and, where permissible, by visiting the buyer’s business premises. If there is no response from the buyer, a site visit and online searches are conducted to ascertain the operating and legal status of the buyer. If the buyer does not make attempts to settle the matter amicably, legal proceedings can be used to recover payments for goods sold and delivered in Singapore. It is, however, prudent to ensure that the buyer has sufficient assets to satisfy the debt before proceedings are initiated.

Legal proceedings

Singapore is a common law jurisdiction. Its laws are principally governed by Supreme Court of Judicature Acts, State Court Acts, other statutes which have procedural application (or contain procedural provisions), the Rules of Court, practice directions, case law and the court’s inherent powers.

Singapore’s courts comprise State (Subordinate) Courts and the Supreme Court. The Supreme Court is composed of the High Court and the Court of Appeal (the final appellate court). The High Court is a court of first instance, generally used for claims beyond the jurisdiction of the State Courts (although the High Court is a court of unlimited jurisdiction and may hear any claim.

Ordinary proceedings

The amount of the debt claim decides which court judges the case.

Unpaid debts normally have a six-year limitation period. A writ action is initiated by the creditor and a summons served on the debtor within six months from the issue of the writ. The defendant has eight days from service of the writ (or 21 days, if the writ was served out of jurisdiction) to enter an appearance, by filing a Memorandum of Appearance with the court. This indicates his intention to defend the suit.

Before a writ can be issued, it must be endorsed with a statement of claim. If there is no statement of claim accompanying the writ, there can be a general endorsement, which consists of a concise statement on the nature of the claim made and the remedial solution desired. If the writ only has a general endorsement, an accompanying statement of claim must be served within fourteen days of the defendant’s entering of an appearance.

Defendants who have entered an appearance are required to file and serve their defence on the plaintiff within fourteen days of entering an appearance, or after service of the statement of claim (whichever is the later). A defendant may make a counterclaim in his defence. The plaintiff must serve the defendant with his reply and defence to any counterclaim, within fourteen days of the defence and counterclaim being served on him.

Default Judgment

If a defendant fails to enter an appearance or fails to file a defence within the time specified in the writ, the plaintiff may enter default judgment against him. This can be a final judgment or an interlocutory judgment, depending on the nature of the claim.

Summary Judgment

If the defendant has entered an appearance and filed a defence, but it is clear that the defendant has no real defence to the claim, the plaintiff can apply to court for summary judgment. To avoid summary judgment being entered, the defendant must show that the dispute concerns a triable issue, or that there is some other reason for trial. An application for summary judgment must be filed within 28 days of pleadings being concluded (unless the court orders otherwise).

Enforcement of a legal decision

Writs of Execution

A judgment can be enforced by a variety of writs of execution. These include a Writ of Seizure and Sale of movable and immovable property, a Writ of Delivery and a Writ of Distress. These writs authorise court officials to take appropriate measures to give effect to the judgment.

Garnishee Proceedings

This can be an appropriate solution when the debtor is owed a debt by a third party (the garnishee). When the creditor garnishes the debt, the garnishee must then make payments due to him, rather than to the debtor. To collect these debts, the creditor must first apply for a garnishee order nisi. This can be filed without the involvement of other parties and leads to “show cause” proceedings. If the garnishee confirms that there are monies due and owing to the judgment debtor at this stage, the Registrar may proceed to make the garnishee nisi absolute.

Registration of Judgment

If the creditor is not able to enforce his judgment in Singapore, he may be able to enforce it in a country where the debtor holds assets. This can be done by commencing fresh proceedings, or by registering the Singapore judgment in the foreign country (on the basis of reciprocity of enforcement between the two countries).

Insolvency proceedings

Schemes of Arrangement

Schemes of arrangement begin with an application to court, for an order summoning one or more meetings of the creditors, members of the company, or shareholders of the company. If the court agrees to the order, a proposal must then be tabled before the relevant meetings and approved by the requisite majority (unless the court orders otherwise) of the creditors, class of creditors, members or class of members, shareholders, or class of shareholders.

The majority required is three-quarters. To allow the relevant parties to exercise their votes in an informed manner, every notice summoning the meeting must contain a statement explaining the effect of the compromise or arrangement. In particular, it must state any material interests of the directors and the effect on them of the compromise or arrangement, should it be different from the effect on other parties involved. If this procedure is not followed and the creditors and members do not have sufficient information on which to make an informed decision, the court may, at any stage, refuse to approve the scheme, even if it has been approved by the requisite majority.

Schemes are only binding once they have been approved by the court. These approvals may be subject to any alterations or conditions that the court deems appropriate. Court approval ensures the integrity of voting outcomes at scheme of arrangement meetings, as well as the fairness of the proposed scheme.

Judicial Management

When a company is in financial difficulty but has reasonable prospects of being rehabilitated, or if preserving all or part of its business as a going concern (or even that the interests of creditors would be better served than by resorting to a winding up), the company or its creditors can apply to court for an order that the company be placed under the judicial management of a judicial manager.

Insolvency Proceedings

If an insolvent company is unable to overcome its difficulties, it can be dissolved. This enables the liquidation of its assets, so that creditors can be repaid, at least in part. This process is known as winding up or liquidation. A healthy company can also be subject to winding up if its members no longer wish the business to continue. When a company is wound up, its assets or proceeds are first used to pay off any creditors. Following this, any balance remaining is distributed pro rata amongst shareholders.